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Phoebe Subpoenas Other Hospitals in FTC Fight

05.01.2013
Albany, GA

Georgia Health NewsAndy Miller

Hospital executives across Georgia have been receiving a surprise delivery in the past week: a subpoena requesting loads of financial information.

The subpoenas were sent by attorneys representing Phoebe Putney Health System, which is locked in a long-running, contentious fight with the Federal Trade Commission over the 2011 Albany hospital merger.

A spokesman for Phoebe Putney told GHN on Wednesday that every Georgia hospital has been sent the requests, and so have some facilities in neighboring states if they treat Georgia patients.

There are two forms of requests. A subpoena to at least one hospital asks for financial statements from 2006 onward as well as medical quality reports, including those by the Joint Commission.

A subpoena to another Georgia hospital, however, asks for much more information, including documents on contracts, compensation, competition, services, pricing, and even the effect of the Affordable Care Act on the hospital if the state does not expand its Medicaid program.

“We understand it’s going to be a burden to other hospitals,’’ said Phoebe spokesman Rick Smith. “It’s unfortunate that all this information has to be sought.’’

The broad nature of the requests appears to have stunned the hospital industry in the state.
Health care experts say Phoebe Putney’s strategy may be to prove that its own market is competitive in terms of pricing of services and access, or to prove that other hospital systems have similar control over their own markets.

Tobin Watt, an attorney for Smith Moore Leatherwood in Atlanta, told GHN on Wednesday that several of the law firm’s clients have received subpoenas.

“I’m not sure where [Phoebe Putney] is heading with this,’’ Watt said. “You kind of assume they’re trying to build an economic picture of the hospital industry in Georgia and trying to demonstrate that their costs and charges are in the mainstream.’’

He said the request for information is especially burdensome for small rural hospitals.

The FTC recently won a favorable ruling in the Phoebe Putney case from the U.S. Supreme Court. The justices, in a unanimous ruling, set aside two previous court decisions upholding the merger, which combined Phoebe Putney Memorial Hospital and Palmyra Medical Center.

The high court ruled that the acquisition by the local hospital authority of Palmyra was not immune from antitrust scrutiny. The decision did not kill the merger, but left it on shaky ground, with legal challenges to continue.

The $195 million deal, which consolidated operations of Phoebe Putney and Palmyra, was completed in December 2011. Phoebe officials have noted that the integration has proceeded to the point where it would be very difficult to unravel.

Lower courts originally ruled that the Georgia General Assembly had already granted antitrust immunity to such deals through a hospital authorities law. The high court rejected that reasoning.

The FTC, which has been fighting the deal for two years, recently filed motions in federal district court seeking a temporary restraining order and preliminary injunction to stop the further integration of the only two hospitals in the Albany area.

An administrative trial on the merits of the acquisition is scheduled to begin Aug. 5. The hearing is expected to explore whether the merger has an anti-competitive effect on the Albany marketplace.

Smith cited the “compact space of time’’ that the Phoebe Putney legal team has before the next hearing.

“I’m not privy to the legal strategy,’’ Smith said. “These are all numbers relevant to the case – how it’s relevant, I couldn’t tell you.’’

An attorney in Washington, D.C., is available to Georgia hospitals if they have any questions, Smith said.

Phoebe Putney officials previously have said the FTC’s requests for a restraining order and injunction would prevent any improvements or renovations to enhance patient care at the facility.

“We will proceed to protect the organization and community interests in court,’’ said Tommy Chambless, Phoebe senior vice president and general counsel, in a statement at the time of the recent FTC court filings. “It’s unfortunate that so many resources must be committed by Phoebe, interfering with the Phoebe mission to deliver the best possible care and exceed the expectations of all we serve.”

During the 2013 Georgia General Assembly session, Phoebe supporters sought to blunt the FTC action against the deal by changing state law.

Legislation was proposed to buttress antitrust immunity for hospital authorities in Georgia – and make those protections retroactive. Theoretically that might have addressed the problem the Supreme Court found with the merger. But the legislation failed.